Gen Z now makes up a large portion of renters across the country. But with global events like the COVID-19 pandemic reshaping life as we know it, the way people rent a house has changed significantly in recent years.
The sage renting advice passed down from previous generations now feels somewhat outdated. As the world evolves, renting practices must also be changed. That raises an important question: what is the best approach for Gen Z renters today?
When it comes to lease terms, choosing which works best in the modern world can be challenging. With that in mind, this guide explores the pros and cons of both fixed-term and month-to-month leases, helping Gen Z renters decide what’s best when they rent a house.
Understanding the Basics of a Lease
Since most Gen Z renters are new to the rental process, it’s important to start with the basics. When you rent a house, apartment, or any other type of dwelling, new tenants must agree to and sign a lease agreement.
This legally binding document outlines the terms and conditions of the rental, detailing the rights and responsibilities of both the tenant and the landlord, as well as any specific clauses. Once signed, both parties are legally required to uphold their commitments.
One key aspect covered in the lease agreement is the duration of the tenancy. This section lets renters know whether they have a fixed-term lease or a month-to-month lease.
What’s the Main Difference Between a Fixed-Term & a Month-To-Month Lease?
A fixed-term lease has a pre-determined endpoint. Upon expiration, the tenant will normally be required to either move out, extend the lease, or switch to a month-to-month agreement, depending on what the landlord wants to do.
Fixed-term leases vary in length, from short-term leases that are typically 3 to 6 months long to long-term leases that are usually 12 months or longer. Meanwhile, month-to-month leases don’t have a fixed end date. Instead, the tenancy automatically renews each month, enabling tenants to live in the rental for as long or as little as they need.
They still need to give the landlord notice of their intent to leave, normally 30 days. However, once the notice is handed in, the tenants can plan their next rental without worrying about break fees. If a tenant with a fixed lease wants to leave before the end of the lease, they may be subject to penalties.
The Advantages of a Fixed-Term Lease
Fixed-term leases, especially long-term ones, have long been considered one of the most stable rental options. While this was especially true in the past, they still offer significant advantages for Gen Z renters today.
1. Stability
The biggest advantage of a fixed-term lease is the stability it provides. With a set end date, tenants can plan ahead without the stress of potentially having to move on just a month’s notice.
2. Fixed Rent
Fixed-term leases can make financial planning easier. The rent amount is locked in for the duration of the lease, meaning it cannot be raised until the lease expires. By contrast, month-to-month leases can see rent increase with market fluctuations (though rent caps and protections often limit steep hikes).
3. Flexibility With Shorter-Term Leases
Short-term fixed leases (typically 3 to 6 months) provide the security of a fixed lease but still allow tenants to adjust to changing circumstances more easily than a long-term commitment.
The Disadvantages of a Fixed-Term Lease
Despite the various positives, there are some downsides to fixed-term leases for Gen Z renters.
1. Less Adaptable
Once signed, the lease terms are legally binding. Breaking the lease early can result in penalties, leaving tenants feeling stuck if life changes suddenly, whether due to a new job, illness, or personal reasons.
2. Can Be More Expensive
If the rental market softens, tenants on fixed leases might pay above-market rent until their lease ends. Month-to-month renters have more freedom to move or negotiate lower rent as prices fluctuate.
3. Potential To Get Stuck in a Rut
Unpleasant neighbors or difficult landlords can seriously affect a renter’s quality of life. With a fixed lease, tenants have little recourse and may be forced to endure a bad situation until the lease expires.
The Advantages of a Month-to-Month Lease
Month-to-month leases may have been seen as the risky option to previous generations, but for Gen Z, who live in a fast-paced world, there are a great many benefits to enjoy.
1. Freedom To Move With Ease
With more remote work and flexible lifestyles, Gen Z isn’t tied to one location. Month-to-month leases let renters try out a place without a long commitment. If it works, they simply renew monthly; if not, they can move on with proper notice, whether for work, personal reasons, or finances.
2. Financial Flexibility
Month-to-month renters can quickly take advantage of falling rents or better deals. They can move easily or negotiate rent reductions to match the market, unlike fixed-term tenants locked into a set price.
3. Better for Mental Health
Bad rentals can harm mental well-being. Month-to-month leases give tenants peace of mind knowing they aren’t stuck, avoiding break fees or the hassle of subletting if they want to leave.
The Disadvantages of a Month-to-Month Lease
Of course, there are two sides to every story, and month-to-month leases are no exception. Potential cons include:
1. Less Security
Flexibility comes at a cost. Month-to-month rentals are often used by landlords who plan to sell or renovate and want to keep the unit occupied temporarily. Once they’re ready, they can give the tenant the required notice (typically 30 days) to vacate. This means that month-to-month renters can be asked to move out at almost any time.
That said, as the rental market evolves, many landlords are beginning to see the value of offering flexible lease options.
2. Often More Expensive
Landlords face more risk with short-term leases, including potential gaps between tenants and additional effort to fill vacancies. To offset this, they often charge slightly higher rent compared to fixed-term agreements.
3. The Rent Can Increase
Since the lease renews monthly, landlords can adjust the terms with relatively little notice. This includes raising the rent, though most areas have limits on how much and require at least 30 days’ notice. Other lease terms may also change from time to time.
Which Lease Is Best for Gen Z?
Both fixed-term and month-to-month leases come with their advantages and drawbacks. The best choice for Gen Z ultimately depends on individual circumstances, needs, and lifestyle preferences.
A month-to-month lease is ideal for those who want to test out a new location before committing, or for renters who work or study remotely and enjoy the freedom to relocate as opportunities arise.
On the other hand, a fixed-term lease is well-suited to Gen Z renters who have found a place they like and are ready to settle in to focus on personal and professional goals. The added stability offers peace of mind and helps eliminate the uncertainty of frequent moves.
For Gen Z renters entering the market for the first time — especially in a new area — it’s often wise to start with a flexible month-to-month lease. If the location proves to be a good fit, transitioning to a fixed-term lease can provide the long-term security they need.
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